I’ve had some comments from readers lately along the lines of:
- “Miles & points just aren’t worth it anymore”
- “Things have changed, why are you still bothering with loyalty programs?”
- “tRaVeL iS dEaD”
I wanted to share my take on this, and why I strongly disagree. Let me of course acknowledge that I have a vested interest here, since this also happens to be what I do for a living. 😉 However, I’ve been collecting miles & points for 15+ years, since long before I made a dime doing this. This isn’t just my job… it’s also my passion.
In no particular order, here’s why I’m not giving up on travel loyalty programs or credit cards:
We’re going to want to travel again
It goes without saying that travel has changed a lot in recent months, and everyone has a different comfort level with getting on a plane, staying at a hotel, or even just leaving home. Some are already happy to travel, while others are (understandably) waiting.
There’s one thing I’m extremely confident about — just about everyone is going to want to travel again, and travel will make a full comeback… eventually.
Heck, I’m sure I’m not alone in saying that I have more of an appreciation for travel than ever before:
- I no longer take crossing borders or traveling worry-free for granted
- I think back oh-so-fondly on even mediocre trips that I’ve taken in the past
- If there’s one good thing to come from coronavirus, I hope it’s that we treasure the travel we can take even more in the future
What I’d give to go back to Tokyo right now…
Points have always been a long-term project for me
Some people collect points because they have a specific redemption in mind, and that’s great. However, for me collecting points has always been a long-term project.
That’s to say that I assign a specific value to each points currency, and I don’t redeem just because I have the points, but rather I redeem because the value proposition is there.
I do what I can to earn and redeem and to not get too big of a balance in any one program, though I’ve never gone wrong with having a points balance with one of the major transferable points currencies, like Amex Membership Rewards, Chase Ultimate Rewards, etc.
Over time individual loyalty programs have devalued, while others have increased in value — that’s the beauty of transferable points currencies, as you get so much flexibility.
Even if I don’t think I can redeem points imminently, personally I’m always happy racking up transferable points, especially if there’s limited opportunity cost.
I value Chase points just as much now as several years ago
We’re going to see more deals than devaluations
Of course there will be exceptions, but in general my expectation is that in the next couple of years we’re going to see more deals than devaluations from loyalty programs.
On the airline front:
- It will take years for business travel to recover, so premium cabin award seats should be more readily available
- Loyalty programs are ultimately a good way to fill seats on planes that would otherwise be empty
On the hotel front:
- Hotel loyalty programs have low reimbursement rates for hotels in situations where hotels aren’t full, so I expect to see lots of redemption promotions, as we’re seeing right now
- Promotions for earning points can really move the needle for filling hotel rooms, so I expect we’ll see lots of those as well
While some programs will counter the trend and devalue, I don’t think that’s going to be the overall theme from loyalty programs over the next couple of years. Just look at the promotions we’ve seen in the past few weeks — Southwest Companion Pass after one flight, Delta matching to Diamond Medallion status for the first time, Marriott Platinum status with a credit card welcome bonus, and much more.
I’m expecting we’ll see lots of empty premium cabin seats
Credit card issuers are offering flexibility
Cards earning flexible points offer quite a bit of flexibility to begin with, but that’s even more the case now than in the past.
For example, while historically the best use of Chase Ultimate Rewards points was for travel, at the moment points can also efficiently be redeemed towards everyday purchases using Chase’s “Pay Yourself Back” feature.
With the Chase Sapphire Reserve® Card (review) this means that you can redeem points for 1.5 cents each towards everyday expenses, including grocery stores, dining, and home improvement stores. That’s a lot of flexibility to have.
This gives you the best of all worlds — you can keep earning points at a great rate, you can save them towards future travel experiences, or you can cash them in now at a good rate towards everyday expenses.
For that matter, there are some credit cards where you can get the best of both worlds even under normal circumstances, and earn cash back or travel points. For example, the no annual fee Citi® Double Cash Card (review) offers 1% cash back when you make a purchase, and 1% cash back when you pay for that purchase.
Best of all, if you have the card in conjunction with a card earning Citi ThankYou points, then rewards can be converted into ThankYou points at the rate of one cent per point. That’s the kind of flexibility that’s more useful than ever before.
Some card issuers are letting you redeem points towards everyday expenses
Travel rewards cards offer better value for spending
Generally speaking, travel cards offer better bonus categories than cash back cards. For example, the American Express® Gold Card offers up to 4x points at restaurants and 4x points at U.S. supermarkets (on up to $25,000 in spend annually). I value that at a ~6.8% return. There’s not really a comparable cash-back card that offers such generous and well-rounded categories.
The way I view it, there is often an opportunity cost to using a cash back card rather than a points card, assuming you know what you’re doing.
Earning 4x points at restaurants is a great deal
Card issuers will keep adapting for the better
We’ve seen credit card issuers adapt their benefits to the new reality, and I expect we’ll continue to see this:
- The travel card space is a multi-billion dollar industry, and they’re not just going to close down shop because times have changed
- Not only are we seeing new benefits and temporary bonus categories introduced, but we’re seeing many card benefits extended, ranging from status to free night certificates
I expect we’ll continue to see this happen over time. After all, card issuers spend a lot of money acquiring customers, and the last thing they want is that people cancel their cards because they no longer find them to be valuable.
I expect more innovation from card issuers
We’re seeing some unprecedented offers
As I mentioned above, there’s no reason not to earn points right now if the opportunity cost is fairly limited. Some of the credit card welcome offers available right now are the perfect example of that, as this can be an easy to rack up rewards that you can redeem soon towards everyday expenses, or in the future towards a travel adventure.
Just to give an example of some of the value to be had, here are some of my favorite offers:
- The Chase Sapphire Preferred® Card (review) is offering its best-ever welcome bonus of 100,000 points
- The American Express® Gold Card (review) is offering a welcome bonus of 60K points
- The IHG® Rewards Club Premier Credit Card (review) is offering its highest-ever welcome bonus of 150,000 points
- The Chase Freedom FlexSM Credit Card (review) is offering a welcome bonus of 20,000 bonus points, with no annual fee
Those are just a few examples of some of the exceptional bonuses we’re seeing right now.
There are lots of incredible card welcome bonuses right now
I completely understand why some people aren’t particularly enthusiastic about loyalty programs and travel credit cards at the moment.
Personally, I’m taking the same approach that I’ve always taken:
- We’re all going to want to travel again, and we’re still going to want to travel as comfortably as we can, and get as good of a deal as possible
- Earning points is part of a long-term strategy, and you really can’t go wrong if you’re earning transferable points
- For the most part flexible points cards offer a better return on spending than non-travel cards
- Keep taking advantage of the great credit card bonuses and perks that are available with limited opportunity costs
How have you adjusted your strategy for earning miles & points as a result of the coronavirus pandemic?